The familiar example of Taylor dispersion of molecular solutes is extended to describe colloidal suspensions, where the fluctuations that contribute to dispersion arise from hydrodynamic interactions. The generic scheme is illustrated for a suspension of particles in a pressure-driven pipe flow, with a concentration-dependent diffusivity that captures both the shear-induced and Brownian contributions. The effect of the cross-stream migration via shear-induced diffusion is shown to dramatically reduce the axial dispersion predicted by classical Taylor dispersion for a molecular solute. Analytic and numerical solutions are presented that illustrate the effect of the concentration dependence of this nonlinear hydrodynamic mechanism. Copyright © EPLA, 2012.